5 Tips for Renting Office Space

by Emily Klingler | 5 min. read

Negotiating an effective commercial office lease is an important investment decision for any company. It is a process that can take up to six months depending on the complexity of the transaction and requires due diligence on the tenant’s side to ensure their business operations will benefit from the type of office space, lease terms and market conditions.

Below are five tips that will help you on your journey to find the right solution for your business when leasing commercial office space.

1. Office Classifications Make a Difference

In commercial real estate, leasing is rarely as straight forward as looking for the cheapest space for rent. Office classifications can make a big difference as a tenant, and understanding the characteristics of each is a helpful tool for narrowing your search and optimizing your office space.

Professional and medical offices can be classified as either Class A, B or C. Each classification offers its own variation of amenities and options for landlords, tenants and visitors. Consider space utilization needs for your day-to-day operations, on-site amenities and parking accommodations for employees, and desired aesthetic experience for visiting clients. This list of demands will guide you in deciding which classification is a better candidate to house your business. Like Goldilocks, you want the space to be just right. For example, overpaying for visibility when that doesn’t benefit your business is a waste of money.

Prioritizing your company’s unique needs and goals will keep your leasing process focused and productive and is key to knowing how efficiently your business will operate within the space in the short and long term. The below chart details the general attributes of Class A, B and C office properties. This is not a precise process and that is one way a trusted advisor can help.

2. Understand Your Lease Options

Aside from the base rent, the type of lease and term will make the biggest difference to your overall costs and responsibilities as a tenant. Budgeting for your revenue and cash flow will determine which type of lease is better suited for your business’s financial goals.

There are various types of leases available, and each carries its own set of risks and obligations for the tenant and the landlord. Reading the fine print on your lease agreement is crucial in knowing what to expect and avoiding unforeseen costs. The three types of leases most often seen are:

NNN
This type of lease includes a lower base rent because all property taxes, insurance, maintenance and utilities fall to the tenant. Although these costs may fluctuate and present challenges for financial planning, this arrangement might give tenants more control of their overhead, allowing them to effectively manage their expenses and maintenance costs.

FULL SERVICE GROSS
Inversely, a full-service gross lease places the burden of property taxes, insurance and maintenance onto the landlord, with the tenant paying a fixed amount of rent that includes operating expenses. This type of lease simplifies tenant expenses into a single predictable amount but eliminates any potential for expense reductions.

MODIFIED GROSS
Modified gross leases are a combination of NNN and full-service structures, where the tenant and landlord divide the property’s operational costs in some way. This type of lease is much more customizable and therefore varies from lease to lease depending on what the tenant and landlord agree upon. Cost fluctuations are likely so a tenant should do their due diligence in understanding the terms of their lease to keep their financial goals and risk tolerance on track.

3. Seize Site Visit Opportunities

Visiting potential office spaces for lease is a tenant’s best opportunity to familiarize themselves with the properties. Site visits give the tenant a chance to evaluate first-hand the location, accessibility and overall condition of the properties to understand their relative benefits and drawbacks. Identifying potential issues up front could either immediately disqualify a property from your list or present a negotiation opportunity when drafting a lease agreement.

Have a prepared list of questions to ask either during the site visit or following up afterwards. This is another place where a trusted advisor can be helpful because they have years of experience of knowing the questions to ask. Some basic concerns to address would be:

• What are the potential development plans in the area that may impact your business?
• Who are the other tenants on the premises?
• What is the base rent?
• What are the general maintenance and repair costs? Are there association or management fees to consider?
• Are tenants able to make changes to the layout and are there any concessions or incentives like rent abatements or build-out allowances?

4. Review and Negotiate Before You Sign

Leases are complex, and utilizing your opportunity to review and negotiate your lease is paramount to effectively executing one. Before signing, you and your landlord should have complete clarity of needs, intentions and expectations.

A well-informed tenant should thoroughly review the lease terms and conditions and seek legal counsel with a professional who specializes in commercial leases.

5. Consider Professional Representation

Navigating the path to leasing commercial office space can be made easier by engaging a trusted professional. An ideal commercial broker will be experienced with your property type and location, have access to current market data and analytics, and will be part of an extensive network of professionals. A broker’s role is to ensure and safeguard your interests as a tenant, and to equip you with all you need to succeed in your lease.

At ROCK, our tenant representation services are designed to provide custom, collaborative solutions to your leasing needs. Reach out today and let us help you find the ideal property for your business.